Philippine Supreme Court Resolutions > Year 2010 > August 2010 Resolutions > [G.R. No. 180267 : August 23, 2010] PHILIP SALVADOR A. SEÑAR, PETITIONER, VERSUS SPS. JOSE AND GRACIA HERNANDEZ, RESPONDENTS. :

Please take notice that the Court, Third Division, issued a Resolution dated 23 August 2010, which reads as follows:

G.R. No. 180267 - PHILIP SALVADOR A. SE�AR, petitioner, versus SPS. JOSE  and GRACIA  HERNANDEZ, respondents.

RESOLUTION

Petitioner and respondents entered into an undated Deed of Undertaking,^[1] notarized on January 24, 2002. whereby respondents will supply construction materials to petitioner, who was a contractor for the construction of the Lahong-Tinapian School in Baleno, Masbate, a government project implemented by the Department of Public Works and Highways (DPWH). The pertinent provisions of the Deed of Undertaking read:

1. The FIRST PARTY will issue postdated check/s payable within thirty (30) days to cover payment of the purchases;

2. Upon the maturity of the check which remains unpaid, the amount of the check shall automatically bear interest at five (5%) percent for every month of delay and compounded every month, until the obligation is paid in full;

3. The amount remaining unpaid shall serve as lien and shall be collected from the releases of fund/s for the project above-mentioned;

4. In case of litigation, the FIRST PARTY agrees to the jurisdiction of the court in the province of Masbate, and the FIRST PARTY shall shoulder the expenses for Attorney's [fees] fixed at twenty-five (25%) percent of the amount collectible, the cost of the suit and other actual expenses incurred by the SECOND PARTY relative to the case.^[2] (Emphasis supplied.)

In November and December 2002, respondents delivered to petitioner construction materials totaling P322,200.00. Petitioner issued to respondents a United Coconut Planters Bank check covering said amount but the same bounced. In March 2003, respondents' counsel sent a demand letter to petitioner for the payment of his obligation plus interest. Respondents' demand, however, remain unheeded.

Thus, respondents filed on July 17, 2003, a complaint^[3] for the collection of a sum of money against petitioner before the Regional Trial Court (RTC) of Masbate City. Respondents prayed for the payment of the unpaid P322,200.00 plus interest computed at 5% per month, compounded monthly, from December 2002 until the obligation is fully paid. They also asked for moral and exemplary damages plus attorney's fees of 25% as stipulated in the Deed of Undertaking.

Petitioner in his answer, on the other hand, prayed for the dismissal of the complaint for lack of cause of action. He cited Paragraph 3 of the Deed of Undertaking and argued that the remaining unpaid balance of his obligation "shall serve as lien and shall be collected by [respondents] from the releases of funds for the projects." He contended that he "has yet to collect from the DPWH the payments of his contracted projects" and "[i]t is from the same collectibles where [respondents] shall collect the said balance, as per undertaking."^[4]

During trial, petitioner and his counsel failed to appear when his turn came to present evidence. He was thus deemed to have waived his right to present evidence.

On February 21, 2005, the RTC rendered a Decision^[5] in favor of respondents. The fallo reads:

WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered in favor of the plaintiffs and against defendant, to wit:

Ordering the defendant to pay the plaintiff the following amounts:

1)	To pay the total obligation of NINE HUNDRED TWELVE THOUSAND, FOUR HUNDRED THIRTY AND 15/100 Pesos, (P912,430.15) Philippine currency, which includes already the accrued interest as per undertaking as of March 2003 and the same shall bear interest at 12% annually starting March, 2003 until said amount shall have been fully paid.
2)	To pay the amount of Fifty Thousand (P50,000.00) Pesos, Philippine currency as moral damages;
3)	To pay the amount of Forty Thousand (P40,000.00) Pesos, Philippine currency as exemplary damages;
4)	And to pay the costs.

SO ORDERED.^[6]

Petitioner appealed the RTC decision to the Court of Appeals (CA) but the CA dismissed the appeal in its March 23, 2007 Decision.^[7] The CA held that petitioner's obligation to pay the respondents cannot be made to depend on the release of funds to be recovered by petitioner from certain government projects since the provision petitioner cited does not actually mandate that his government projects be paid first before respondents could claim payment from him.

Aggrieved, petitioner filed the present petition for review on certiorari raising the following issue:

IS THE FINDING OF THE HONORABLE COURT OF APPEALS, FIFTEENTH DIVISION, THAT PARAGRAPH 3 OF THE PARTIES' DEED OF UNDERTAKING IS NOT A CONDITION PRECEDENT] TO THE FILING OF THE RESPONDENTS' COMPLAINT FOR SUM OF MONEY AGAINST THE PETITIONER CORRECT?^[8]

Petitioner contends that Paragraph 3 of the Deed of Undertaking was provided to secure collections by respondents and should there be remaining unpaid accounts, respondents can simply establish their lien against the remaining funds to be released by the DPWH. He argues that said provision did not only provide a mode for effecting collection for the remaining unpaid account but also provided for the source of funds from where the collectibles will be satisfied.

After a review of the records of the case, we find that the CA did not commit a reversible error in dismissing petitioner's appeal. As correctly ruled by the appellate court, the provision petitioner cited does not require that the government project be paid first before respondents could claim payment from him for the construction materials they delivered. It is not a condition precedent for the enforcement of the payment since it merely provides a lien in favor of respondents over the collectibles from the DPWH. A lien is merely a legal right or interest that a creditor has in another's property, lasting usually until the debt or duty that it secures is satisfied.^[9] It does not prevent a creditor from collecting payment from his debtor and any lien created in his favor merely serves as security for the obligation.

Accordingly, the present petition is DENIED. The Decision dated March 23, 2007 and Resolution dated October 15, 2007 of the Court of Appeals in CA-G.R. CV No. 84841 are AFFIRMED and UPHELD.

With costs against the petitioner.

SO ORDERED.

Endnotes:

---

^[1] Records, pp. 48-49.

^[2] Id. at 48.

^[3] Id. at 1-3.

^[4] Id. at 11.

^[5] Id. at 60-64.

^[6] Id. at 63-64.

^[7] CA rollo, pp 68-77. Penned by Associate Justice Vicente S.E. Veloso, with Associate Justices Juan Q. Enriquez, Jr. and Marlene Gonzales-Sison concurring.

^[8] Rollo, p. 13.

^[9] Goodyear Philippines, Inc. v. Sy, G.R. No. 154554, November 9, 2005, 474 SCRA 427; 438, citing Garner (ed. in chief), Black's law Dictionary (7^th ed., 1999), p. 933.